Customer relationships provide a means of achieving competitive advantage primarily because of the economic advantage derived from customer retention. Relationship Marketing is a popular strategy service firms employ to improve relationship quality in an attempt to develop a loyal customer base. Although service relationships develop over a series of service encounters, extant theory is yet to address the dynamic nature of such relationships.

This thesis advances the current literature by examining changes in service relationships over time. The accumulation of experience over the duration of the service relationship is examined as a dynamic phenomenon which influences customer perceptions. Specifically, this research seeks to examine the effect of relationship experience on the association between relational benefits and relationship quality, and between relationship quality and loyalty.

A nationally representative mail based survey of service consumers was conducted. A broad research context was implemented through the use of Bowen's (1990) service typology which allowed for the customer's perception of their service relationship to be explored across a range of service types. Multigroup analysis of invariance revealed significant differences between novice and experienced customers in terms of their perceptions of relational benefits, relationship quality and loyalty. The results promote the differential tailoring of relationship marketing strategies to novice and experienced customers and confirm the dynamic nature of service relationships.